Notwithstanding my attempt to juxtapose IP investments with other categories of investments (e.g., stocks, gold, real estate), patent assets are unique from any other investment class.
Unlike any other investment category, the intrinsic worth of a patent asset is derived on the basis of a legal conclusion–whether the claims of a patent are valid, enforceable, and read on a current-day product or service (put another way, whether a read exists).
But only the judicial system (i.e., district court judge, jury, appellate judges) can issue a legally-binding opinion as to whether or not a read exists–no one else.
Up until a final decision is made as to whether or not a read exists, realizing a patent asset’s potential value is a high-stakes “dice roll” between a patent holder and potential licensee–a dice roll involving (1) calculated risk and (2) persuasive advocacy.
(1) Regarding risk, by initiating a monetization campaign a patent holder risks some or all of its patent claims being invalidated or risks receiving an non-favorable ruling regarding the scope of its claims–any such ruling may adversely affect the monetization campaign’s long-term success. On the other hand, a potential licensee risks, when it chooses to not take a license, significant legal expenses, a finding of infringement, and potentially huge damages liabilities.
(2) To maximize returns on a patent asset prior to a ruling, a patent holder must persuade a potential licensee that their exposure is high, and that it’s in their best interest to take a license, preferably early on in the litigation. On the other hand, to minimize a licensing payment, the potential licensee attempts to persuade the patent holder that it has a high likelihood of invalidating the patent and/or obtaining a noninfringement ruling.
The best patent monetization teams have the ability to maximize patent returns in the gap between providing notice of infringement to a potential licensee and receiving a final ruling from a court, by persuading a potential licensee that its own exposure is high and that the patent holder’s risk is minimal.
As an IP investor, be sure your team has what it takes to effectively persuade potential licensees to take early licenses, at a price point that maximizes value–this is the difference between monetization teams that just survive, and those that thrive.